Source:
Bloomberg.comBernanke Says Subprime Curbs to Hurt Housing Market (Update1)
By Craig Torres and Alison Vekshin
May 17 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said a tightening in sub-prime mortgage standards will hurt the U.S. housing market and foreclosures will rise through 2008.
``Curbs on this lending are expected to be a source of some restraint on home purchases and residential investment in coming quarters,'' Bernanke said at a conference in Chicago today. ``We are likely to see further increases in delinquencies and foreclosures this year and next as many adjustable-rate loans face interest-rate resets.''
The Fed chairman maintained his forecast that the slump in housing won't have a broader impact on the economy. ``We do not expect significant spillovers from the subprime market to the rest of the economy or financial system,'' Bernanke said.
Fed officials this year have cited the housing recession as a main risk to growth, which was the weakest in four years last quarter. Bernanke's comments today reflect the consensus of policy makers that the downturn in housing is unlikely to cause consumers to cut spending. Former Fed chief Alan Greenspan also said that subprime problems aren't spreading to lower-risk loans.
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